2025 (1) TMI 1409 - AT - Income Tax

Assessee wins bogus purchase case with comprehensive evidence including invoices, ledger accounts, and GST records

Kalamandir Jewellers Limited Versus The DCIT, Circle – 1 (1) (1), Surat

ITAT Surat held in favor of assessee regarding bogus purchase allegations. AO added amount claiming assessee failed to produce delivery challans and GST ... Bogus purchases - AO has made the addition by stating that assessee had not produced delivery challan as to when stock is received - assessee also did not produce copy of bills and GST challan to show that purchases are genuine - HELD THAT:- AR had submitted that all details were given to AO and CIT(A). We find that assessee had submitted copy of invoice of M/s Om Jewellers, ledger account of Om Jewellers in the books of the assessee, GST portal showing the impugned transaction, B2B invoice list for the month of February, 2018 from GST portal to show that the purchase was in fact made by the assessee from M/s Om Jewellers. The assessee has also submitted ledger account of M/s Om Jewellers where the impugned transaction is reflected. Thus, assessee has given all the details which are needed to explain the genuineness of the purchase made from Om Jewellers. However, the AO has considered the transaction with same other entity, namely M/s Aum Chain & Jewellery for making the addition. AR contended that assessee purchased the jewellery from M/s Om Jewellers and not from M/s Aum Chain and Jewellery. The explanation given by the assessee has not been controverted by the lower authorities and there is no corroborative evidence to support the case of revenue that assessee had made another purchase of equivalent value of jewellery from another penalty i.e., M/s Aum Chain & Jewellery. Hence, the addition is deleted. Decided in favour of assessee. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this appeal were:1. Whether the Commissioner of Income Tax (Appeals) [CIT(A)] erred in upholding the addition of Rs. 10,87,021/- made by the Assessment Unit of the Income Tax Department by rejecting the evidence submitted by the assessee during the appellate proceedings under Rule 46A of the Income Tax Act.2. Whether the Assessing Officer (AO) erred in reopening the assessment under Section 147 and issuing a notice under Section 148 based on information from a survey indicating that the supplier, M/s Aum Chains and Jewellery, did not record sales made to the assessee in its books of account.ISSUE-WISE DETAILED ANALYSIS1. Rejection of Evidence under Rule 46ARelevant Legal Framework and Precedents: Rule 46A of the Income Tax Rules governs the admission of additional evidence during appellate proceedings. The rule requires that any additional evidence not produced before the AO must be accompanied by a valid application explaining the reasons for its non-production during the assessment stage.Court's Interpretation and Reasoning: The Tribunal examined whether the CIT(A) correctly applied Rule 46A in rejecting the additional evidence submitted by the assessee. The CIT(A) had dismissed the evidence on the grounds that no application under Rule 46A was filed, and the assessee failed to prove the source of funds.Key Evidence and Findings: The assessee provided documentary evidence, including invoices and GST portal screenshots, which were not presented during the assessment proceedings. The Tribunal noted that these documents were crucial to establishing the genuineness of the purchases.Application of Law to Facts: The Tribunal found that the assessee had indeed submitted sufficient evidence to demonstrate the genuineness of the purchase from M/s Om Jewellers. The Tribunal observed that the CIT(A) failed to consider this evidence adequately, leading to an erroneous confirmation of the AO's addition.Treatment of Competing Arguments: The Tribunal considered the arguments of both the assessee and the revenue. The revenue supported the lower authorities' decision, while the assessee argued that the purchases were genuine and adequately documented.Conclusions: The Tribunal concluded that the CIT(A) erred in rejecting the additional evidence under Rule 46A and upheld the genuineness of the purchases from M/s Om Jewellers.2. Reopening of Assessment and Notice under Section 148Relevant Legal Framework and Precedents: Sections 147 and 148 of the Income Tax Act allow for the reopening of assessments if there is reason to believe that income has escaped assessment. The issuance of notice under Section 148 is a procedural requirement to initiate reassessment.Court's Interpretation and Reasoning: The Tribunal considered whether the AO had valid grounds to reopen the assessment based on information from a survey indicating unrecorded sales by M/s Aum Chains and Jewellery. The Tribunal noted that the AO's reliance on the survey findings was misplaced, as the assessee's transactions were with M/s Om Jewellers.Key Evidence and Findings: The Tribunal found that the AO failed to provide corroborative evidence supporting the claim of bogus purchases from M/s Aum Chains and Jewellery. The evidence submitted by the assessee showed genuine transactions with M/s Om Jewellers.Application of Law to Facts: The Tribunal determined that the AO's basis for reopening the assessment was flawed, as it relied on incorrect information about the assessee's transactions. The Tribunal emphasized the importance of accurate and corroborated evidence in justifying reassessment.Treatment of Competing Arguments: The Tribunal evaluated the revenue's argument supporting the AO's actions and the assessee's contention that the purchases were genuine and correctly recorded.Conclusions: The Tribunal concluded that the AO's reopening of the assessment and the subsequent addition were unjustified due to the lack of corroborative evidence and the incorrect identification of the supplier.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal stated, 'The explanation given by the assessee has not been controverted by the lower authorities and there is no corroborative evidence to support the case of revenue that assessee had made another purchase of equivalent value of jewellery from another entity i.e., M/s Aum Chain & Jewellery.'Core Principles Established: The Tribunal reinforced the principle that additional evidence should be considered if it is crucial to establishing the facts of the case, even if not initially presented during assessment. It also emphasized the necessity of corroborative evidence for reopening assessments.Final Determinations on Each Issue: The Tribunal allowed the appeal, deleting the addition of Rs. 10,87,012/- and rendering the additional ground academic. The Tribunal found that the purchases from M/s Om Jewellers were genuine and that the AO's actions were based on incorrect information.